Next year shipowners’ profits are expected to fall
After a record-breaking rush, the development of the logistics sector is slowing down. Experts note a decline in demand for services, and as a consequence – rates for container transportation are going down. According to the analysts of HSBC Bank from Great Britain, shipowners’ profits may sag significantly in the next few years, in some cases, the fall will be up to 80%.
Despite these predictions, the previous quarters for the shipping industry were as good as they could be. Many operators reported profit increases of 100% or more, and company revenues grew rapidly. Maersk posted net profits of $8.6 billion in the second quarter of this year, a 132% increase over the same period in 2021. In the first quarter of 2022, the figure was at $6.8 billion, here an increase of 150%.
The Danish company’s competitor, CMA CGM, ended the second quarter with a profit of $7.6 billion, an increase of 118% over last year.
Maersk expects its EBITDA to be about $37 billion by the end of 2020. Last year, the result was $24 billion.
However, experts note that such record growth is coming to an end. Analysts think that rising inflation rates and high energy costs have a negative impact on consumer demand. Accordingly, rates for container transportation are gradually decreasing.
Over the week the WCI index fell by 5% and reached $5,661. For the Shanghai-Rotterdam route, the index was $7,583, which also indicates a decrease of 5%. For the year WCI has dropped by 46%.
The reason for the record profits of shipowners was high tariffs for container transportation. Now rates are decreasing, which leads to a decrease in the profits of logistics operators. HSBC Global Research predicts that during the period 2023-2024 the income of shipowners will fall by 80% on average. But despite these figures, the industry will still grow more rapidly than it did before the pandemic. At that time some operators incurred losses, but now this development is not expected.
Analysts point to the global economic downturn as the main factor behind the drop in profits. In the near future, consumer demand will be increasingly affected by inflation and price increases. In addition to the drop in revenues, companies should also prepare for the fact that downtime awaits. During the market rush, the need for containers increased at a record high, but because demand is on the decline, many of them will not be used.
After a slowdown in 2023 and 2024, the sector will gradually begin to pick up again.
